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Wall Street's bust-and-boom pandemic year will be capped by one of the biggest tech IPO bubbles in years, as shares in holiday rentals company Airbnb more than doubled on their first day of trading on Thursday.
The shares closed at $144.71, a massive leap from the $68 at which Airbnb sold them to new investors late on Wednesday, and three times the $44-$50 range the company gave last week.
That first-day price values the lossmaking company at $86bn, or more than twice the market cap of the world’s largest hotel group, Marriott.
Coming the day after delivery company DoorDash pulled off an equally spectacular stock market debut, lifting its valuation above $70bn, Airbnb’s performance touched off inevitable comparisons with the first internet bubble, which peaked more than 20 years ago.
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A flood of cash has buoyed fast-growing tech stocks this year at a time when much of the stock market — and the global economy — is stuck in the doldrums. Zoom, the emblem of working from home and one of last year’s hottest IPOs, at one stage hit a $160bn valuation.
But 2020's biggest IPO success of all could be a company few people have even heard of — Snowflake, a San Francisco data analytics group. Its stock market value this week rose above $120bn, eclipsing the once dominant IBM.
“Twenty years ago with the internet bubble is increasingly the apt comparison,” said Jay Ritter, an expert on IPOs at the University of Florida. “Back then the valuation of internet stocks was divorced from the general market. Once again we’re seeing this detachment.”
Other analysts said the latest stock market euphoria had been largely confined to the IPO market and a handful of hot stocks such as electric carmaker Tesla, suggesting a different mentality was at work.
“This seems to be a phenomenon driven by IPOs — we’re not back in 2000,” said Richard Clarke, an analyst at Bernstein. “It’s at the end of the year, it’s a great way of driving profits. You can’t afford to miss out.”
Investors were partly looking for ways to bet on a rebound in the travel sector next year, he added, which had fuelled the demand for Airbnb.
The group’s splashy stock market debut comes despite the damage to its business from the pandemic, which forced it to slash staff and raise an emergency financing round to stave off disaster early this year.
Brian Chesky, Airbnb's chief executive officer, struggled for words on CNBC as he looked back on the crisis. "That price would have priced us around 30 bucks," he said of the emergency financing. "I don't know what else to say. I'm very humbled by it."
Mr Chesky holds a stake that is now worth more than $11bn. He and his co-founders, Joe Gebbia and Nathan Blecharczyk, will retain 42.2 per cent of the voting rights in the public company. The founders sold 1.5m shares in the offering, amounting to about $106m at the IPO price, while the company raised $3.4bn in new money.
“Even though [AIRBNB HAS]obviously been hurt by the pandemic, as has all travel, it stands to really get most of the early tail winds as people start coming out of hiding,” said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors. – Copyright The Financial Times Limited 2020.